Philip Maddocks: Banks’ image sullied now that they have been revealed to have used steroids

Philip Maddocks

Friday

Feb 27, 2009 at 12:01 AMFeb 27, 2009 at 2:16 AM

At a press conference Thursday, Treasury Secretary Timothy Geithner revealed that all 20 of the country’s biggest banks had tested positive for performance-enhancing drugs in 2006.

At a press conference Thursday, Treasury Secretary Timothy Geithner revealed that all 20 of the country’s biggest banks had tested positive for performance-enhancing drugs in 2006.

The news — the latest in a string of damaging revelations about the reckless and ethically questionable manner in which the once revered institutions have operated over the last several years — hit shareholders particularly hard.

"I thought all those numbers were real and now I have to accept they weren’t, that it was all one big lie. Frankly I feel betrayed," said one shareholder, while taking a pause in a game of pickup Monopoly with his 6-year-old son in a park area on the Liberty Street grounds of The Federal Reserve Bank of New York. "I just don’t think I can trust this business anymore. What am I going to tell my son? It hurts me to say it, but I think I am going to have to tell him to try out for one of the Canadian banks. The money isn’t as good, but at least he can feel good about himself and what he is doing."

The revelation that many of the biggest names in banking had achieved their greatness and record earnings with the aid of performance-enhancing drugs appeared to anger fans of banking more profoundly than any of the other reported misdeeds that had preceded it.

Hordes of CitiGroup season shareholders gathered outside the company’s corporate headquarters on Park Avenue in New York on Thursday and burned their stock certificates in a ceremonial protest.

"This is just the last straw," said one member of the protest group, the self-described "Slum Dog Investornaires." "I could put up with consolidated debt obligations, irresponsible lending practices, even bank nationalization. What I can’t bear is this mentality of cheating to get an unfair edge. It has sullied the business forever in my eyes and I wash my hands of it."

Others worried that in cultivating their own Faustian deal, the banking businesses may have taken the industry down a dark, soulless road from which there was no turning back.

"Back when I was in the business, banks played hard and were always trying to get an edge, but cheating was not an option," said one retired banking executive. "They cared too much about the business to do anything like that. But the banks in the business today don’t care about the purity of it. They only care about themselves. There is too much money in the business and it is spoiling it for everyone."

A similar tone of lost innocence resonated in neighborhoods across America, where youngsters had looked up to these banks as heroes and their parents had regarded the towering financial institutions as worthy role models.

That these 20 big banks, the highest-paid in the business and widely viewed as the most talented, have tested positive while rolling up billions of dollars in profits for investors and company executives, has not only damaged their public reputation but their chances of entering The Masters of the Universe Hall of Fame in the Cayman Islands.

The big banks had long denied any use of performance-enhancing substances. Still, the disclosure that they had tested positive in 2006 did not come as a shock to people in banking. Fairly or unfairly, the big banks’ names have been linked more than once to possible drug use, if for no other reason than the tremendous profit numbers they had produced.

Last year, the former slugger José Canseco produced his third book on steroid use, this one focusing on the banking industry. In the book — "In Tranched" — he asserted that the big banks, in the late 1990s, expressed interest in steroids and that Canseco then introduced the banks to a trainer who was familiar with performance-enhancing drugs. Canseco said that the trainer later told him that the banks had "signed on," implying that big banks had begun using performance enhancers.

In a joint statement, the big banks reiterated their claims that they weren’t certain that what they had been doing was wrong.

"Our mistake was being mature and smart," the banks said. "For a week we kept looking for another bank to blame, but they kept on failing. "

"We should have seen it," said one observer. "I mean what did we think happened. One year they are regular banks and the next they suddenly have those misshapen investment ideas and those bulging debt-to-equity ratios. It just wasn’t natural."

Philip Maddocks can be reached at pmaddock@cnc.com.

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